Expro(US:XPRO)2025-10-23 16:02Financial Data and Key Metrics Changes - Expro reported quarterly revenue of $411 million and EBITDA of $94 million, representing a 22.8% margin, with adjusted free cash flow of $46 million, or 11% of revenue, marking the highest recorded by the company to date [4][24] - EBITDA margin increased by approximately 50 basis points from the previous quarter and 270 basis points year-over-year [23] - The company raised its 2025 annual guidance for EBITDA and free cash flow, expecting adjusted EBITDA between $350 million and $360 million and adjusted free cash flow between $110 million and $120 million [25][26] Business Line Data and Key Metrics Changes - North and Latin America (NLA) revenue was $151 million, up $8 million quarter-over-quarter, driven by higher well construction and flow management revenue [27] - Europe and Sub-Saharan Africa (ESA) revenue decreased by $7 million to $126 million, primarily due to lower well flow management and subsea well access revenue [28] - Middle East and North Africa (MENA) revenue was $86 million, slightly lower than Q2, with an EBITDA margin of 35%, down about 100 basis points [28] - Asia-Pacific (APAC) revenue decreased by $8 million to $49 million, with an EBITDA margin of 21%, down about 500 basis points from the prior quarter [29] Market Data and Key Metrics Changes - The company has a $2.3 billion backlog, providing solid revenue visibility and demonstrating a diverse portfolio across regions [6] - Despite a softer commodity price environment, the outlook for Expro's core markets remains constructive, with expected recovery in upstream investments in 2026 and beyond, particularly in offshore projects in Latin America, the Middle East, and West Africa [8][10] Company Strategy and Development Direction - Expro's strategy focuses on maximizing and sustainably generating free cash flow through industry cycles, with a commitment to operational excellence and disciplined capital allocation [20][22] - The company aims to expand its wallet share with existing customers and enhance service offerings while leveraging technology to drive profitability [12][13] - Expro is committed to investing in technology leadership and digital capabilities to deliver innovative solutions and enhance competitive positioning [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in Expro's ability to deliver resilient performance despite softer market conditions, emphasizing a diversified business mix and strong customer relationships [33][35] - The company anticipates continued growth in free cash flow generation in 2026, supported by ongoing cost efficiencies and margin-accretive growth [35] - Management highlighted the cautious sentiment among customers due to geopolitical factors and commodity pricing, which may impact activity levels in the first half of 2026 [51][52] Other Important Information - Expro repurchased around 2 million shares for approximately $25 million, achieving its annual target of $40 million ahead of schedule [5][24] - The company received several industry awards for safety and technology innovation, reinforcing its commitment to operational excellence [15][16] Q&A Session Summary Question: Drivers of margin expansion for 2026 - Management indicated that the full-year effect of the Drive25 initiative, internationalization of recent acquisitions, and rollout of new technologies will contribute to margin expansion [37][38] Question: Offshore activity outlook - Management noted that Asia-Pacific may lag, while West Africa and the Gulf of Mexico are expected to see increased activity in the second half of 2026 [39][40] Question: Share repurchase plans for the rest of the year - Management confirmed that they will continue to evaluate opportunities for share repurchases in line with their capital allocation framework [42][43] Question: Activity levels in 2026 - Management acknowledged potential softness in the first half of 2026 due to customer caution but expects a ramp-up in activity later in the year [48][52] Question: Production solutions services and regions - Management described production solutions as focusing on existing infrastructure and brownfield activities, with strong opportunities in the Middle East and West Africa [60][61] Question: Margin uplift drivers - Management emphasized that margin uplift will depend on geographic and product mix, particularly the contribution from the Middle East [70][72] Question: Scalability of new technologies - Management expressed optimism about the scalability of the remote clamp installation system, expecting increased market uptake in 2026 and 2027 [74][76]